Tesla (TSLA) on Monday defended a proposal to ratify CEO Elon Musk's $56 billion pay package, arguing that a new compensation plan would be costlier, just days after a top proxy advisory firm recommended shareholders vote against it. The electric-vehicle maker emphasized that Musk's pay package, one of the largest in corporate America, has motivated him to create "tremendous value" for shareholders.
This defense comes in response to Institutional Shareholder Services (ISS) labeling the pay package as "excessive" and raising concerns about Tesla offering shareholders an "all or nothing" option ahead of their annual meeting on June 13. The compensation plan, set and approved by shareholders in 2018, ties Musk's rewards to Tesla's market value and operational milestones.
Market Overview:- Tesla defends Elon Musk's $56 billion pay package.
- ISS recommended shareholders vote against the pay package, calling it "excessive."
- The compensation plan was approved in 2018 and rewards based on market value and milestones.
- The package was voided by a Delaware judge in January; Tesla seeks to move its incorporation to Texas.
- Tesla claims ISS's recommendation is based on a "technical misunderstanding."
- A new compensation package could cost shareholders significantly more.
- Shareholders will vote on the proposal at the annual meeting on June 13.
- Tesla argues that rejecting the proposal could result in higher costs for shareholders.
- The debate highlights the challenges of balancing executive compensation with shareholder interests.
Tesla said in its Monday filing that the ISS recommendation is based on a "technical misunderstanding," noting that the advisory firm acknowledged the company's strong performance under Musk. The company added that under Delaware law, ratification means the proposal must be accepted or rejected in its entirety. A new pay package, Tesla argued, would be significantly more expensive, with a comparable grant of new options resulting in an accounting charge exceeding $25 billion, compared to the $2.3 billion charge originally recognized for the 2018 award.
"A deal should be a deal. He delivered on his end of the bargain. It's time for us to deliver on ours," Tesla stated, emphasizing Musk's role in the company's substantial growth and innovation. The upcoming shareholder vote will test investor support for one of the most controversial executive compensation plans in corporate history.
